Standing Committee F

[Mr. Joe Benton in the Chair]

Employment Bill

Clause 30 - Contracts of employment

Philip Hammond: I beg to move amendment No. 53, in page 35, line 27, at end insert-
'(2A) The Secretary of State shall by regulations prescribe a procedure for certification by the Advisory, Conciliation and Arbitration Service, or by a Tribunal or by the Secretary of State of model agreements to follow procedures other than the statutory procedure as being not inconsistent with the requirements of the statutory procedure'.
 Good morning, Mr. Benton. We shall need to make rapid progress today as the guillotine, which the Government outrageously imposed, will fall after clause 41 at 7 pm. That means that some substantial issues that fall to be debated today will have to be raced through at a canter, if not a gallop. 
 I apologise to you, Mr. Benton, and the Committee for having to leave a little early before lunch-[Interruption.] I am glad to see that Labour Members are disappointed-

Helen Jones: Desolate.

Philip Hammond: Desolate, indeed, at my enforced departure. I have been fortunate enough to secure an Adjournment debate on a matter of great importance in my constituency. I trust that I may crave your indulgence, Mr. Benton, and that of the Committee. My hon. Friends will hold the fort admirably in my absence.
 Amendment No. 53 is yet another step in my perhaps not quite one-man campaign to try to reduce the earning potential of lawyers. Under clause 30 statutory provisions are written into contracts of employment. The Minister has explained the logic of his position and I do not take issue with the substance of that. However, subsection (2) provides that 
''Subsection (1) shall have effect notwithstanding any agreement to the contrary, but does not affect so much of an agreement to follow a particular procedure as requires the employer or employee to comply with a requirement which is additional to, and not inconsistent with, the requirement of the statutory procedure.''
 As I understand it-the clause is not easily penetrable-it will not interfere with the wording of the contract to the extent that the contract provides for procedures in addition to and not inconsistent with the statutory procedures. Clearly what the Minister has in mind is that if employers and employees want to agree on a more comprehensive disputes procedure-perhaps if they want to adopt the Advisory, Conciliation and Arbitration Service's code-nothing in the clause should prevent them from doing so. 
 If the Minister has in mind adoption of the ACAS code, I can see why he has not addressed the problem that I am trying to address. If it is established that the ACAS code 
''is additional to, and not inconsistent with''
 the statutory procedures, adoption of the ACAS code in a contract will clearly be acceptable. However, there is no specific reference to the ACAS code and it is possible that employers and employees could try to write into contracts other provisions that may be inconsistent with the statutory procedures, which would open the door for yet another lawyers' bonanza. 
 I have tried to provide a procedure whereby ACAS could pre-clear a contract so that if an employer, a group of employees, a trade union or a group of employers through a trade association or federation wanted to produce a model contract, they would be able to submit it to ACAS and obtain what amounts to a pre-clearance of the wording of the contract as being compliant with the Bill. I am simply trying to avoid unnecessary litigation and to provide some certainty for all parties concerned. I am not committed to the wording or the method in the amendment, but I hope that the Minister will accept the principle that we want to establish certainty so that employers and employees can enter contractual arrangements knowing that they are compliant comply with the law without having to get involved with lawyers. The ACAS route is the obvious one, but I look forward to hearing from the Minister and, if he accepts in principle what I am trying to achieve, whether he can suggest a better method of achieving that.

Alan Johnson: The clause ensures that all employees have a contractual right to use the statutory dispute resolution procedures. It does so by inserting an implied term to that effect in all contracts of employment so that when employers do not operate more elaborate procedures, the minimum statutory procedures in schedule 2 will be deemed to apply to employees as a default.
 The amendment would cover situations in which employers already operate procedures. Those employers will be largely unaffected by the clause, and their procedures will usually incorporate the basic three steps of the statutory procedures. If so, they will not need to amend their existing arrangements. Others may fail at the margin to comply fully; in such cases only small adjustments would be required.

Philip Hammond: The Minister said that the amendment covers situations in which there is an existing arrangement. Can he confirm that the clause will apply equally to new contracts that include procedures
''additional to, and not inconsistent with''
 the statutory procedures?

Alan Johnson: Yes, they would. The three-step procedure has been designed to be simple for those organisations that do not have a procedure at the moment, and there is no ambiguity. The procedures were designed to be simple and easy to understand. Relatively few actions are involved, they are clearly defined and it should be straightforward for employers to ascertain whether their procedures are consistent with the statutory minimums. Uncertainty should not arise, and I do not believe that there is a strong argument to set up an accreditation system to certify the procedures that individual employers operate. Such a certification procedure would be costly: hundreds of thousands of employers operate procedures, and many of them might wish to gain the accreditation on offer.
 There is nothing to stop reputable organisations from drafting procedures that may serve as models. Employer organisations or trade unions may wish to do so and, more generally, ACAS stands ready to advise individual employers on their internal procedures. 
 In summary, it would be relatively easy for employers to check their own procedures against the statutory minimums. If employers are in doubt, sources of advice are open to them to help with the exercise. I fully share the hon. Gentleman's concern that we do not make more work for lawyers: a Government-funded accreditation system would be unnecessary and wasteful. I hope that the hon. Gentleman will withdraw his amendment.

Philip Hammond: I am interested to hear the Minister's comments. I did not draft the amendment to provide an accreditation system but as a way of delivering to employers certainty that the contract that they offer is compliant. I recognise what the Minister said about ACAS's willingness to advise, provide information and generally support the process. The purpose of the amendment is to flag was to flag up the issue and to ensure that the Minister had considered it. Having heard his comments, I beg to ask leave to withdraw the amendment.
 Amendment, by leave, withdrawn. 
 Clause 30 ordered to stand part of the Bill.

Clause 31 - Non-completion of statutory procedure: adjustment of awards

Philip Hammond: I beg to move amendment No. 54, in page 36, line 34, leave out paragraph (d).

Joe Benton: With this it will be convenient to take amendment No. 55, in page 36, line 36, leave out paragraph (e).

Philip Hammond: Clause 31 deals with a penalty system for failure to comply with statutory procedures and a number of issues arise which I am sure Members on both sides will want to explore. That is probably best done on clause stand part.
 I suspect that the amendments have been grouped for reasons of economy, not because there is a clear link between them. Amendment No. 54 seeks to leave out clause 31(5)(d), which says that the Secretary of State may by regulations 
''make provision about circumstances in which a person is to be treated as not subject to, or as having complied with, such a requirement'',
 that is, the requirement to undertake the statutory procedure. The amendment was tabled to probe the Minister as to the circumstances in which he intends to designate a person as being ''not subject to'' such a provision, or as ''having complied with'' it.

Alan Johnson: A key part of the Bill is to ensure that procedures are used to try to resolve disputes. Clause 31 and the regulations made under it will encourage completion of the statutory procedures by enabling tribunals to vary an award if a party does not comply with the requirements of the procedure in question.
 At the same time, we recognise that there will be occasions when it will not be appropriate or possible for a party to complete or even initiate procedures. One example would be where the applicant has suffered harassment and the person to whom she would have to complain has been implicated in the harassment claim. Another example would be where there was the threat of violence by either party. That issue was raised in an earlier debate. Serious illness could also make completion of the procedures impossible. Nor do we envisage that the statutory procedures should be used when the issue has been handled as a collective process. 
 When provisions are fleshed out in regulations, a balance will have to be struck between not allowing so many exemptions as to nullify the purpose of the clause and recognising that there will be circumstances in which it would be unreasonable or impractical to expect the procedures to be used or completed.

Philip Hammond: The Minister has cited as one of the circumstances in which the provisions would not apply a situation in which collective procedures, rather than the statutory procedure, had been used. Is not the import of what we have just discussed in clause 30 that those collective procedures would be additional to and consistent with the statutory procedures? If so, it is not clear to me why he needs to exclude compliance with the statutory procedures. By implication, those would have been complied with because the broader and more extensive procedure that he has in mind had been complied with.

Alan Johnson: Simply, if, for example, a grievance had been taken up by a trade union and represented collectively-whatever that grievance might be-it would be unfair on employers to expect each individual to go through the grievance procedure when the matter was being dealt with collectively with the employees. We do not want to duplicate the process and force employers to go through a procedure several times when the issue is collective.
 A balance needs to be struck. We are determined to get it right, and we will consult on the regulations. I recognise that these are important issues, but I hope that I have given some flavour of what we expect from the provision to which amendment No. 54 refers. 
 Are we also debating amendment No. 55?

Philip Hammond: Yes.

Alan Johnson: I am here courtesy of Nurofen this morning, but I will struggle through.
 Amendment No. 55 attempts to remove the Government's ability to modify statutory procedures. However, I believe that the provision that it would delete is sensible and necessary. We have no intention of making wholesale modification of the procedures, but we need flexibility in case, when we come to make the regulations, we discover circumstances in which it would be sensible to adjust them. 
 Let me give the illustration for which the hon. Gentleman asked. We might want to allow for a delay in the disciplinary procedure should an employee under notice of dismissal make an application to a tribunal for interim relief while the procedure is taking place. In such circumstances, the outcome of the interim relief application would be crucial to the decision about the dismissal. That would require a modification to the procedure because under the procedure, the timing of the meetings is required to be reasonable. As hon. Members will know, interim relief is available where the tribunal thinks that the employer may have dismissed for certain reasons that are automatically unfair. Union membership is one example, as is the so-called whistleblower's act of making a disclosure in the public interest. 
 I hope that those examples give the hon. Member enough substance to be able to withdraw what is, as he said himself, a probing amendment.

Philip Hammond: I am grateful to the Minister. His comments were very useful. However, I have to probe him a little further on collective dealing. Does the Minister propose that where a recognised trade union is negotiating on behalf of its members in a workplace, other employees who are not represented by the union would be prevented from raising a similar matter through the grievance procedure? Is that what the Minister has in mind? Can he assure the Committee that the availability of a separate procedure for collectively represented workers will not in any way exclude the rights of unrepresented workers in a workplace where such a procedure is taking place.

Alan Johnson: It would depend on the issue. If there were a collective issue about the absence of a proper catering facility and the union was addressing that collectively with the employer, it would be unfair, given that a recognised union exists to deal with collective issues, to insist that the employer should deal with complaints about the absence of facilities individually as well. That is an important point, because I would not want to take away the rights to pursue a grievance of individuals who are not trade union members. We shall consider the point when we come to the regulations, but I hope that the hon. Gentleman understands the gist of what we are trying to do.

Philip Hammond: I do indeed understand the purpose that the Minister outlined. I am grateful to him for recognising the potential difficulty if the Bill deprived an individual worker of what he would regard as his rights. That would place the worker in an adverse position simply because some of his colleagues were pursuing a collective route to solution of a similar grievance.
 I am glad that we have had the opportunity to flag up that concern. I am grateful to the Minister for undertaking to consider it. I hope that we can return to the point later in the Bill's consideration to ensure that we do not inadvertently create a group of second-class employees who have fewer rights than colleagues in a non-unionised workplace, simply because some of their colleagues are unionised. I beg to ask leave to withdraw the amendment. 
 Amendment, by leave, withdrawn.

Philip Hammond: I beg to move amendment No. 56, in page 36, line 45, leave out paragraph (b).

Joe Benton: With this it will be convenient to take amendment No. 57 in page 36, line 48, leave out paragraph (c).

Philip Hammond: Again, I suspect the grouping of these amendments is more in the interests of economy than anything else. Amendment No. 56 is a probing amendment, to seek the Minister's clarification of just what jurisdictions he has in mind. A list of jurisdictions is contained in schedule 3, and subsection (6)(b) gives the Secretary of State the power to make provision, excluding the application of clause 31 to proceedings, relating to claims of any specified description in relation to any specified jurisdiction. That is very widely drafted, and we are being asked to scrutinise a Bill that contains very wide regulation-making powers. It is appropriate to ask the Minister to explain just what he has in mind and why he thinks he needs that very wide power.
 Amendment No. 57 reverts to a familiar theme and a debate that I guess we have already had in relation to another part of the Bill. It is about the power that the Minister is giving himself to define someone who is not an employee as an employee for the purpose of clause 31, and, indeed, to define someone who is not an employer as an employer. Without wanting to go round the loop of the employee-worker debate, I maintain that the power is unnecessary because if at some future stage the Government are determined to extend the definition of employee in general employment protection legislation, a general application change would have to be made to the primary legislation, although I do not know exactly how that could be done. Nevertheless, such changes would affect a wider body of legislation than this Bill. 
 It is unclear why the Minister needs to take a specific order-making power to deal with something that would arise only as part of a broader decision to change the boundary between employee and worker or the definition of who is subject to or benefits from the Bill and similar legislation. I am unhappy that he is taking a power to do something that could not be done by order if it were to apply generally. If the power was of narrow application to the clause, it would sit oddly with the Secretary of State's confirmation on Second Reading that the question of the worker-employee distinction would be part of the Government's broader review of employment legislation, which will, if she believes it necessary, lead to legislation during the course of this Parliament. I would be pleased to hear the Minister's views on those two subjects and an explanation on my last point.

Alan Johnson: On amendment No. 56, schedule 3 lists the jurisdictions to which clause 31 applies. The probing amendment is searching for an example of where we may need the power that the amendment seeks to exclude so that that example may be addressed in the regulations, which returns us to the collective versus individual argument. For example, although unfair dismissal is one jurisdiction listed in schedule 3, it is unlikely to be possible to apply the statutory procedures to unfair dismissals arising out of industrial action because they arise out of a collective dispute. This example relates to a jurisdiction already listed in schedule 3, but subsection (6)(a) enables new jurisdictions to be added to the list. When and if we consider making such additions, it may well become apparent that the statutory procedures are suitable for some descriptions of claims that can be brought under the jurisdiction but not others. It is therefore prudent to be able to exclude the procedures from applying to particular descriptions of claim within a jurisdiction that might be added in future.
 Prudence also drives us to oppose amendment No. 57. We have previously cantered round the worker-versus-employees course. It is sensible to retain the flexibility to widen the coverage of the clause beyond employees, should that be considered necessary in the light of next year's employment legislation review. The subsection that the amendment seeks to remove will give us the ability to implement the findings of the review if it recommends an extension of the clause to non-employees. The hon. Gentleman does not know how that could be done, and in that he is at one with me, but we should not pre-empt the outcome of the review. It may lead to changes in some areas, it may lead to no changes or it may lead to the type of blanket change to which he referred, which would have to be dealt with in other legislation.

Philip Hammond: In my opening remarks, I should have asked the Minister to give a categorical assurance that he will not introduce an order under this subsection other than as a consequence of the comprehensive review about which the Secretary of State has spoken. He gave such an assurance the last time we discussed the worker-employee distinction, and if he can give us such an assurance now it would alleviate our concern.

Alan Johnson: I am happy to give that assurance and hope that it enables the hon. Gentleman to withdraw the amendment.

Philip Hammond: The purpose is served as regards amendment No. 57. We may have disagreements about the wisdom of putting such a provision in the Bill, but as long as the Minister uses it only in the context of the outcome of broader review, and as long as contentious issues will be debated and properly scrutinised following review, that is fair enough.
 On amendment No. 56, the Minister has once again come up with a circumstance in which it may not be appropriate to apply statutory procedures, and I cannot disagree with him about the possibility of such a circumstance arising. However, it is unfortunate that a simple three-step procedure-some on the Labour Benches may argue that it is too simple-which will be implied and, I hope, spelled out in every contract of employment, will appear straightforward, understandable and comprehensive to an employee but may turn out to be full of all sorts of caveats and exclusions when he seeks recourse to it. Those will have been made by order and will not have been apparent from reading the Act. 
 I hope that the Minister agrees that that would be a reason for using regulation-making powers sparingly. Part of the attractiveness of having a simple procedure that applies to everyone in every case without exception is that it creates certainty and familiarity. I suspect that one thing that horrifies employers and makes employees reluctant or wary of pursuing their rights is the sheer complexity of wading through reams of statutes, regulations and orders to find out what applies to a case. I hope that the Minister will bear in mind that excessive use of the ability to exclude classes of cases or persons will undermine the purpose, which we broadly support, lying behind the introduction of a simplified procedure. I beg to ask leave to withdraw the amendment. 
 Amendment, by leave, withdrawn. 
 Question proposed, That the clause stand part of the Bill.

Tony Lloyd: In passing, I note that invitations from the Opposition to the Minister to set all aspects of Government regulations in aspic have so far been unsuccessful. I hope that he will tell the Committee that the review will now have to proceed apace so that we can unlock those aspects of the Bill.
 The clause contains provisions to reduce, or increase, the value of an award depending on how statutory procedures have been complied with. In subsection (4) there is a duty to make a reduction or increase, but that is offset by 
''exceptional circumstances which would make a reduction or increase of that percentage unjust or inequitable''.
 I ask the Minister to reflect on the words ''exceptional circumstances'' and on whether the subsection would be better without the word exceptional. The turning point would then be the lack of justice or equity, rather than the exceptional nature of the circumstances. In some discrimination cases that appear before a tribunal, such as bullying cases, it is not necessarily reasonable to expect the person being bullied to pursue a complaint when the person making the judgment has been the source of the bullying. That applies where the bullying is of a fairly straightforward kind. 
 According to a survey by the Equal Opportunities Commission, in one third of sexual harassment cases the perpetrator is the line boss, and in a further third the perpetrator is a director or senior manager. In other words, those who sit in judgment at different points in the statutory process could be the perpetrators of such unacceptable behaviour. The clause need not be changed fundamentally, but the word ''exceptional'' is not appropriate, because although such a circumstance would certainly be ''unjust and inequitable'', it might not be exceptional.

Philip Hammond: I shall want to say something about removing ''exceptional'' in a moment, but the hon. Gentleman's concern would surely be dealt with by exclusions that the Secretary of State is empowered to make under subsections (5) and (6). It would seem inappropriate to empower the Secretary of State to exclude cases such as those involving sexual harassment from a duty to comply with the procedure, and to overlay that power with the ability not to apply penalty provisions in a wide range of cases.

Tony Lloyd: I understand what the hon. Gentleman is saying. Of course, in any case he has persuaded the Minister to freeze the process for the time being. Therefore, even if the Secretary of State were minded to exclude sexual harassment from the provisions in the clause, the exclusion would not necessarily apply when the Bill is enacted.

Philip Hammond: Will the hon. Gentleman give way?

Tony Lloyd: Let me make this point first, so that we can at least agree about what we differ on.
 I am arguing not that sexual harassment should be excluded from the clause-in certain circumstances, its inclusion could be appropriate-but that a clear message needs to be sent about cases such sexual harassment and bullying. The hon. Member for Runnymede and Weybridge may be right to say that they could be dealt with under subsection (5), but the phrase ''exceptional circumstances'' has a ring that might not be appropriate, given what we know about the norm in such cases. Two thirds of the perpetrators of sexual harassment are line managers or more senior figures, and it could be argued that it would not be exceptional for certain individuals to want to fall outside the scope of the provisions.

Philip Hammond: The hon. Gentleman seems to have interpreted the Minister's concession to me rather more widely than I did. In my view, the Minister has simply undertaken not to use subsection (6)(c) ahead of the Secretary of State's wider review. He offered no commitment not to use other regulation-making powers in the clause ahead of that review.

Tony Lloyd: I am sure that the Minister will be grateful for that interpretation.

George Osborne: The hon. Member for Manchester, Central (Mr. Lloyd) is absolutely right: according to Equal Opportunities Commission statistics, sexual harassment cases that do not involve the line manager or the ultimate boss are the exception. I am not sure whether the Minister said that he would exclude all sexual harassment cases from the relevant procedures, or only those involving line managers, bosses and so on. In any event, the majority of the latter will be excluded, as the hon. Gentleman says.

Tony Lloyd: The simple point that I am trying to make is that the Minister should perhaps reconsider using ''exceptional''. It is unnecessary because the driving force behind the subsection is the phrase ''unjust and inequitable''. Tribunals would be able to interpret cases, whether exceptional or not, in a common-sense way that is consistent with the intention behind the clause.
 The point that I am trying to make is fairly simple. I hope that the Minister will consider it, although I do not expect him to offer a commitment now. It is important that we get such matters right, and it is also important that he re-emphasise a view that I know he holds, which is that the purpose of the clause is not to make life more difficult for the victims of bullying or sexual harassment.

Philip Hammond: I disagree with the hon. Member for Manchester, Central, in that removing the word ''exceptional'' would change the nature and operation of the clause. The intention behind it is to introduce an automatic penalty for failing to comply with the statutory procedure, and matters such as those to which he has referred by way of illustration could easily be dealt with through an exclusion from the requirement to use that procedure. The point of defining the area to which the statutory procedure must apply is to make it absolutely clear that an automatic non-discretionary penalty will be imposed on a party who fails to comply with that procedure.
 I have no difficulty in understanding the hon. Gentleman's argument. In effect, he is suggesting that we sweep away the automatic penalty procedure and operate on a case by case basis in the light of justice and equity. That is a perfectly logical suggestion, but it constitutes not a minor change to the clause but a fundamental unravelling of the intention behind it. On balance, I should be very concerned if abandonment of the automatic surcharge principle and a resort to an inquiry into the justice and equity of charging various amounts were to become a more widespread procedure. Such a change would involve not merely the removal of a partially redundant word, as the hon. Gentleman seemed to suggest; but would be fundamental and would require in-depth debate.

Tony Lloyd: In any case, a tribunal would have a duty under subsection (4) to examine the equity and justice underpinning a waiver. I assume, however, that in normal circumstances the clause would kick in and the tribunal would exercise the right to increase or decrease the penalty as appropriate, subject to the test of equity and justice. My problem with the word ''exceptional'' is that it prescribes something over and above the question of equity and justice. The point is a narrow one, and time and experience will tell, but I hope that the hon. Gentleman and the Minister will consider carefully whether use of the word ''exceptional'' is necessary.

Philip Hammond: I am not sure whether we disagree-I think that we probably agree. I am not a lawyer, but I suspect that use of ''exceptional'' will prove significant in terms of the way in which the clause is interpreted. As the hon. Gentleman has suggested, a tribunal will not routinely look at the equity and justice of a surcharge that it is about to impose. As I understand it, it will be empowered to inquire into the equity or justice of making such a surcharge only in exceptional circumstances. I do not want to initiate a debate now about whether it would be better to have a system based on equity and justice rather than a standard tariff system, except in exceptional circumstances. I think it important, however, that the hon. Gentleman should recognise that what he proposes is not tidying-up or tinkering at the edges but a fundamental re-writing of the way in which the clause would work in practice.
 I hope that the Minister will not say that he will consider what his hon. Friend proposes because the Bill, as has been said many times, is a delicately balanced package. Were the Minister to move in the direction in which his hon. Friend the Member for Manchester, Central seeks to persuade him, I suspect that it would change the balance of that package. As the hon. Gentleman has sprung his suggestion on the Committee, I have not considered it in great depth, but, intuitively, I would not want to concede on it readily without examining it in some detail. I hope that the Minister will give a robust defence of the wording in the Bill and will not be tempted to tell his hon. Friend that he will go away and think about his suggestion with a view to possibly taking it on board.

Alan Johnson: I hope that I can reassure my hon. Friend the Member for Manchester, Central. The correct interpretation of the assurance that I gave to the hon. Member for Runnymede and Weybridge (Mr. Hammond) came from the hon. Gentleman himself. We seek to introduce a system of mitigation of between 10 and 50 per cent. for employers and employees who do not follow the system. That is not meant to deal with cases of bullying, violence and sexual harassment. The regulations themselves will make exceptions in those cases. To take the point that the hon. Member for Tatton (Mr. Osborne) made, those cases will be where, to follow the procedures, the employer or the employee-depending on the circumstances-would have to come into face-to-face contact with the person who had assaulted or bullied them.
 We seek to deal with those cases in regulations, not through the ''exceptional circumstances'' subsection. That subsection provides for a tribunal to vary the mitigation below 10 per cent. if there are exceptional circumstances, and it will be a matter for the tribunal to decide on. The subsection covers all jurisdictions, but let us take unfair dismissal as an example. When we come to later clauses, we will find that if an employer fails in any way to implement the statutory minimum procedure, dismissal is automatically unfair and there will be a minimum of four weeks' pay in compensation to the individual concerned. The 10 per cent. mitigation comes on top of that. 
 However, in some, very rare, circumstances, the tribunal may decide that that amount is disproportionate. It might want to go below 10 per cent. because to apply 10 per cent. would be disproportionate for a small employer who had breached a minor part of the procedure. We think that that will be rare. The tribunal will not have discretion in this regard over bullying and harassment cases because procedures for those will be set out in a separate regulation. 
 My hon. Friend the Member for Manchester, Central raised an important point about the review, and he has raised that point before. I repeat the assurance that my right hon. Friend the Secretary of State gave on Second Reading that that review will commence early next year. With those comments, I hope that the Committee can agree that clause 31 stand part of the Bill.

Rob Marris: I may have missed this technical point earlier, in which case I hope that the Committee will forgive me. Are the boosted awards-if I may use that shorthand phrase-intended to apply to the employment appeal tribunal as well as to the employment tribunal? I cannot see that the Bill says that. For example, could they apply if an appeal tribunal reversed a decision of an employment tribunal and brought in an award?

Alan Johnson: Perhaps I will dwell on that for a while and give my hon. Friend the answer later. His point about the employment appeal tribunal is a point of law. We are trying to deal with the statutory procedure for the majority of cases, but he raises a point about which I shall remain clueless for the moment, until I have another Nurofen. I will respond later.

Rob Marris: That is why I referred to, for example, an employment appeal tribunal overturning a decision of an employment tribunal. I am aware that employment appeal tribunals usually examine questions of law rather than questions of fact. Does that assist him at all?

Alan Johnson: It gives me no assistance whatsoever, but assistance will come from somewhere. I hope that my hon. Friend will agree that the clause stand part of the Bill; I will respond to his question later this morning.
 Question put and agreed to. 
 Clause 31 ordered to stand part of the Bill. 
 Schedule 3 agreed to.

Clause 32 - Consequential adjustment of time limits

Philip Hammond: I beg to move amendment No. 58, in page 37, line 16, leave out paragraph (c).
 This is a probing amendment. It seeks to leave out clause 31(2)(c), which allows regulations to 
''make provision treating proceedings begun out of time as begun within time.''
 I have pondered on that for a while but I cannot see what the Minister is driving at. When will it be right and proper to treat proceedings begun out of time as being timely? 
 It may be fine to adjust time limits to reflect statutory procedures. That does not seem the same, however, as taking the power to decree that proceedings that are out of time are within time. Can the Minister clarify the exact circumstances in which that power will be appropriately deployed? I hope that it is precisely definable, because otherwise it is a rather sweeping power that could have serious consequences. If it is definable, why can it not be defined in the Bill, rather than being reserved as a regulation-making power?

Alan Johnson: The short answer is best given in an example, such as a case in which an employee is seriously ill and would have to have started the procedure within the three-month limit. We are making provision through regulation for treating proceedings begun out of time as begun within time. I am sorry: we are talking about beginning proceedings out of time. That would apply when the employee concerned-in, say, a dismissal case-is seriously ill and unable to attend the hearings or respond to the employer's inquiries.

Philip Hammond: Can the Minister be precise about what he means by ''begun''? It seems to me that proceedings would have been begun, even were the employee subsequently, for a prolonged period, unable to attend meetings or respond to the employer's inquiries. My understanding is that the Minister proposes to take a power to allow a proceeding to be begun after a long period, when no steps have previously been taken.

Alan Johnson: In exceptional circumstances, that will be the case. Most jurisdictions have a three-month time limit. Let us remember that we are looking to get disputes resolved in the workplace and to end the culture in which the IT1 and IT3 forms are flying about the system and there has not even been an attempt fully to resolve the issue in the workplace.

George Osborne: Is there not a paradox here? Schedule 2, which we debated previously, involved no time limits and the Government did not accept the amendments that my hon. Friend tabled to it. Here, however, we are talking about extending time limits for employment tribunal actions. What is to stop an employer or an employee spinning out the procedures to delay going to an employment tribunal?

Alan Johnson: The hon. Gentleman makes a good point, but there is a difference between this debate and those that we had on the basic three-step procedure, when we talked about ''reasonable'' time. If I remember rightly, that debate was about setting a period of a month. It is for the employer and employee to decide that matter.
 The precise point that the hon. Gentleman made about the possibility of an employer spinning out the procedures will be discussed when we reach clause 33 on admissibility. 
 At the moment, most jurisdictions in schedule 3 have a three-month time limit for presenting a claim and the tribunal has the power to extend that time limit, generally where it believes that it was not reasonably practicable to have presented the claim within the time limit. We propose that complaints should not be regarded as out of time if a statutory procedure was begun within the normal period for complaining, but the application is made later, during an extended period of a further three months. Those extra three months would run from the expiry of the original three-month period. In some cases, a statutory procedure may not be commenced until after the expiry of the time limit, which would normally be when the claim itself was also out of time. We want to consider whether there should be any provision for extending the time limit if it was not reasonably practicable to have started the procedure within the time limit-for example, if the employee concerned was seriously ill. 
 In most jurisdictions, there will be three months to submit the claim, an extension of three months to allow internal procedures to be completed in exceptional circumstances, and a further two months if both parties agree that they have made sufficient progress to be able to resolve the case internally. That moves away from a procedure in which people focus on the employment tribunal almost as soon as the award has been made. 
 We are trying to deal with exceptional cases, of which the example of serious illness comes to mind and was raised during consultation. Given those assurances, I hope that the hon. Gentleman will be willing to withdraw the amendment.

Philip Hammond: Not entirely. I understand and agree with much of what the Minister said, but I still have reservations. Subsection (2)(b) gives him the power to
''make provision about the exercise of a discretion to extend the time for beginning proceedings''.
 So in the case of a potential applicant who was seriously ill, the tribunal could extend the time for beginning proceedings. Unless I have misunderstood, subsection (2)(c) will be a retrospective power. Consequently, an employer who believed that he had no outstanding claims, and no potential for outstanding claims because the period for bringing claims had passed, could suddenly find himself subject to claims that were, on the face of it, way out of time. Subsection (2)(c) refers to making provision for 
''treating proceedings begun out of time as begun within time''.
 The Minister will respond that he would not make such regulations without imposing some backstop time limit-at least, I hope that he will. Nevertheless, if that backstop time limit was, say, five years, is it reasonable that somebody who is expecting a claim to be brought within the normal period of six months could suddenly find, two or three years later, that a claim is popping up from nowhere? I am sure that the Minister would not want to encourage that. 
 The legitimate situation that he describes, in which a person is seriously ill, would be better dealt with under subsection (2)(b). Subsection (2)(c), which is a retrospective power, appears to be unnecessary. Moreover, it could create a highly unsatisfactory situation for an employer who has had to dismiss several members of staff. He will know, when he does so, that it is possible that a claim will be brought. He will metaphorically hold his breath until the period for the making of a claim has passed, then regard himself as being free of potentially having to answer an application in the employment tribunal. 
 Can the Minister be more explicit about why he needs the power in subsection (2)(c) and confirm that it would operate retrospectively, unlike subsection (2)(b), whereby a discretion would be exercised before the deadline for extending the time limit? I assume that, under subsection (2)(c), discretion would operate retrospectively, so that an application that was brought after a year would be deemed to have been brought within six months. That would not be a good way to proceed, and I should be grateful for the Minister's clarification.

Alan Johnson: We can deal with the detail in the regulations. We want to ensure that a procedure started within the three-month period can be completed through an extension. However, my example concerned a discipline case. In a grievance case, the first time that most employers hear about the grievance is in the employment tribunal. In a grievance case in which the person who has made the complaint has been seriously ill, that person might not be in a position even to start the procedure until after the three-month period has elapsed. We are not talking about six years. We do not envisage that the regulations will stretch it even beyond a year. I hesitate to say what will be in the regulations, other than that it will be the subject of wide consultation.
 We have to cater for this eventuality so that we are able to say to the person concerned, ''It's clear that you didn't have the opportunity to commence your claim within the three-month period.'' 
 The hon. Gentleman asked about the backstop. That is a legitimate point, but it can be dealt with in the regulations. I am asking the Committee to accept the principle that we need to cater for people who could not even begin the process within three months.

Philip Hammond: Will subsection (2)(c) operate rigidly? In other words, will the Minister specify circumstances in which proceedings begun out of time would always be treated as having been begun within time, or will he give the tribunal a discretionary power?

Alan Johnson: I would hope that we can be as tight as possible in terms of giving examples of where it could happen. However, I do not want to remove the tribunal's discretion. We cannot envisage in this Room all the circumstances that could arise whereby someone with a perfectly legitimate case to take to an employment tribunal has been debarred because of a lack of flexibility.

Philip Hammond: With respect to the Minister, if he wants to give the tribunal the power to deem that an application made out of time is treated as having been made within time, the wording of subsection (2)(c) is faulty. It allows regulations to make provision treating proceedings begun out of time as having been begun within time, but does not allow them to make provision to allow a tribunal to treat proceedings begun out time as having been begun within time. The draftsman seems to have in mind a set of circumstances in which proceedings begun out of time would in certain circumstances be deemed to have begun within time.
 I am encouraged by the Minister's recognition that there needs to be a backstop date. I shall give him a simple, practical, everyday example of where the provision might be onerous for the owner of a business. When selling a business, it is customary to be required to make a series of warranties about the state of the business, one of which will typically be that there are no outstanding claims by employees and no claims that are capable of being made by employees-in other words, that any event that could give rise to a claim is already out of time. The prudent vendor would have to disclose a circumstance that had occurred at a time that meant that any claim was by then out of time but still potentially within the remit of subsection (2)(c). 
 It would be helpful if the Minister could throw light on what the draftsman precisely intended in 2(c). The purpose of the amendment has largely been served by focusing the debate on what the period of time, or backstop date, should be. We could have the debate when the regulations are published, but I suspect that they will be chunky and that many similar issues, which are not exactly earth-shattering but are none the less important, will be raised. During a 90-minute debate, not everything will be dealt with, so either on Report or in the other place, the matter should be further probed. 
 Understandably, the Minister did not want to commit himself to a year, but I sense that he was tempted by the idea that a year might be the right backstop. If, later in the Bill's passage, he were able to give a clearer indication of a backstop so that an employer could know that he was definitely clear of liability for a claim, that would also be helpful.

Alan Johnson: In the case of warranties, an employment tribunal has the discretion to extend the time limit-there is no time limit, in effect-where it is not reasonably practicable for the individual to submit the case. That discretion exists and I hesitate to interfere with it; we want to supplement it with defined circumstances and a time limit in the regulations, but we do not want to detract from the tribunal's discretion, which is rarely used at the moment. That will not make the employers' position any worse, as the hon. Gentleman said, and it will make it a great deal better in the circumstances to be defined in the regulations.

Philip Hammond: That is helpful and has thrown light on the issue. I will reflect on it. I beg to ask leave to withdraw the amendment.
 Amendment, by leave, withdrawn. 
 Clause 32 ordered to stand part of the Bill.

Clause 33 - Non-completion of statutory procedure: exclusion of claims

Philip Hammond: I beg to move amendment No. 63, in page 37, line 19, leave out 'may' and insert 'shall'.

Joe Benton: With this it will be convenient to discuss the following amendments: No. 59, in page 37, line 19, leave out 'any of'.
 No. 46, in page 37, line 30, at end add- 
'(4) Nothing in the regulations shall prevent a claim if there are exceptional circumstances which would make preventing a claim to an employment tribunal or preventing a employment tribunal from hearing a claim unjust or inequitable.'.

Philip Hammond: Interestingly, the Trades Union Congress brief on the Bill expresses the view that the Government would table amendments to clause 33. I will be fascinated to learn whether any hon. Members can throw light on what those might have been. I have no information, but I studied the provisional selection list and the blue pages of the Order Paper on Monday morning in eager anticipation of seeing Government amendments. If the Minister intends to table amendments to the clause at a later stage, it would be courteous of him to tell the Committee. It would be odd to consider a clause that the Government already anticipate that they will amend.
 Amendment No. 63 will be familiar to those members of the Committee who have been awake throughout the proceedings. It would replace the word ''may'' with ''shall'' in the first line of the clause, and so make it clear that the Secretary of State will use regulation-making powers to make provision for the purpose of excluding claims in cases where statutory procedure has not been complied with. I understand the preference for using the permissive term in the architecture of the Bill, so this is a probing amendment to ensure that the Minister will use its powers. Without wanting to labour a point that has been mentioned many times, the Bill is a package of measures, some of which will help employees to enforce their rights, others of which will help employers to deal with vexatious or unreasonable claims, or with claims that had not complied with procedures that would have dealt with them better than an application to a tribunal. 
 To put the point bluntly, if there are six clauses, all of which say that the Secretary of State may do something, three of which will greatly benefit the employees and three of which will benefit the employers, there would be a problem if the Secretary of State implemented the three favourable to one side and did not implement the three favourable to the other side. That is why I seek an assurance from the Minister that he intends to use the powers to make provision for excluding a claim where procedures have not been followed. 
 Amendment No. 59 would mean that the Secretary of State's regulation excluding a claim where procedures had not been followed would have to apply to all the jurisdictions listed in schedule 3, and not to a cherry-picked selection. It may or may not be right for the Secretary of State to select some jurisdictions as appropriate for exclusion of claims where procedure has not been followed, and for others not to be appropriate. If the Committee is to scrutinise the Bill and understand what its intention, the Minister has to come clean about which jurisdictions he would and would not intend to apply the power to. I look forward to hearing the Minister's response, and in particular, to hearing whether he can throw any light on the suggestion in the TUC brief, that there will be Government amendments.

Brian Cotter: Clause 33 gives the Secretary of State the power to regulate to exclude claims to an employment tribunal where there has been a failure to follow any part of the new statutory procedure. We want to promote the use of internal grievance procedures, but we must accept that the use of such procedure is not necessarily appropriate in all cases. We must recognise that fact. We must protect employees who might have a reasonable excuse for not partaking in such an exercise.
 The TUC has outlined where internal procedures might be inappropriate in its response to ''Routes to Resolution''. 
''We believe that for discrimination cases, it may often be inappropriate for a worker to go through an internal procedure, particularly in a small business where the person hearing the case, may be the perpetrator of the discrimination.
 The TUC goes on to point out that , a recent report by the Equal Opportunities Commission, indicated that 
''a third of women who had experienced sexual harassment named their line manager as the person responsible, and a third named the director or owner of the organisation.''
 In cases where discrimination or intimidation is taking place, particularly in small firms, it would therefore seem inappropriate to expect the employee to go through the statutory procedure with the very person responsible. I am sure that we can all accept that.

Mark Simmonds: I hope that the Committee will forgive my voice today. Does the hon. Gentleman also think it appropriate that in the case of sexual harassment, the position should be mirrored for an employer, if the employer, rather than the employee, had been sexual harassed?

Brian Cotter: Yes, it is absolutely clear that cases such as this are extremely difficult. I recall a similar case during my business life, and it was very difficult. It is a very difficult field indeed. I know that women can speak more strongly on this issue than men because they can feel intimidated by what some people may consider a minor sexual problem with their employer. The amendment reasonably draws attention to that factor, and it is designed to ensure that regulations drawn up by the Secretary of State must be drafted in such a way as not to exclude claims automatically in the exceptional circumstances that I have described.
 I urge hon. Members to support the amendment because it would ensure that those who have a genuine grievance but are, through no fault of their own, ''unable''-an appropriate word because it accurately describes the situation such a person would be in-to follow internal procedures are not denied the right to seek redress. 
 Unlike the Minister, I am not on Neurofen, but I am struggling to deal with things, having had a sleepless night. This is an important issue, and there are difficulties in addressing the problems of those who are involved in the workplace, or in any situation in which sexual harassment occurs, in the manner laid down by the law. I hope that he will give a clear and adequate answer to that point.

Tony Lloyd: All Committee members will sympathise with the hon. Member for Weston-super-Mare (Brian Cotter) on his sleepless nights. It is a good job that we have not gone back to the old days when Committees regularly sat through the night, which meant that everybody was guaranteed those delights.
 Amendment No. 63 provides me with the opportunity briefly to probe the clause's intentions with my hon. Friend the Minister. He will appreciate that with the addition of the word ''shall'' the clause could become draconian. Even with the word ''may'', it would allow, in the far distant future, a Conservative Secretary of State enormous power to drive a coach and horses through the Bill's intentions. It is important for him to flesh out the circumstances in which the Government would make regulations. 
 The hon. Gentleman has raised examples of cases in which, as my hon. Friend has made clear, the Government do not want to penalise would-be applicants to a tribunal. Because the Committee is being invited to pass this wide-ranging clause without any example regulations, it would help if my hon. Friend were to tell us exactly what his intentions are and how far and wide that will go. That would help to move the debate on and ensure that Committee members such as myself feel more comfortable.

Alan Johnson: This is an important part of our deliberations. We have set up a system under which every workplace must have grievance and discipline procedures. On the previous clause, we agreed that there should be mitigation for both respondents and applicants who do not use those procedures. Now we are discussing whether claims should enter the employment tribunals system if they have not completed the internal procedure. It is an important area, and I understand hon. Members' concerns, which is why I shall take some time to set out the Government's position.
 The Bill presents a mutually supporting package of proposals to encourage the use of internal procedures, and clause 33 is an important part of that because it deals with the admissibility of tribunal applications. Employment tribunals already assess applications against a set of qualifying criteria. Most notably, they can rule applications out of time if they are not submitted within a set period, which will usually be three months. Under clause 33, we intend to establish new admissibility criteria against which tribunal applications will be judged. The criteria will be based on the statutory procedures and will be introduced by regulation under the power conferred on the Secretary of State in subsection (1). 
 It may help Committee members if I explain how the Government intend to use this power. I hope that I can reassure my hon. Friend the Member for Manchester, Central and the hon. Member for Runnymede and Weybridge. We propose to set admissibility criteria linked to the initial stages of the statutory grievance procedure. The applicant should be required to complete at least step one of the procedure, the sending of the written complaint, before the tribunal can admit an application. In addition, a period-say, four weeks-should elapse after the step one letter has been sent before an application can be admitted. That ensures that the parties have time to begin discussing the grievance, which should ensure that the grievance is at least aired and clarified before an application is made. If the dialogue proved productive, I would expect many potential applicants to defer submitting their tribunal application beyond the end of set period while the procedure was used more fully. Clauses 31 and 32 should also encourage them to do this. 
 Those two admissibility criteria, the sending of the step one communication and the passing of a set period thereafter, would apply to most jurisdictions mentioned in schedule 3. However, we do not intend that they should apply to unfair dismissal, which must be excluded because dismissals are preceded by employer-driven actions under the statutory dismissal procedure. It would be inappropriate to make tribunal applications by a former employee dependent on the action or inaction of the employer. The hon. Member for Tatton, who is not in his place, raised that point earlier. 
 The Government are mindful that we do not want to create a complicated admissibility system, which is a point that repeatedly came up in our consultations. We do not want to create scope for additional disputes to arise between the parties, especially by the minority of unscrupulous employers who would want to delay the processing of an application. That would potentially clog up the tribunal system with calls for many more preliminary hearings. 
 We believe that we will avoid these problems because the two criteria are easy to understand and apply, and it should be simple for applicants, employers and tribunals to verify whether they have been met. Our approach should not affect or restrict access to justice. It merely sets reasonable preconditions for the making of applications to tribunals. These criteria can apply to all situations and should not be difficult to meet. 
 We recognise, however, that there will be rare cases in which the threat of violence or serious personal harassment may make it dangerous or intimidating for applicants to take step one action before making an application. We therefore intend to use the regulations to define circumstances in which tribunals may admit claims where the two admissibility criteria have not been met. 
 We therefore agree with the point the Liberal Democrats are making in amendment No. 46 that there should be some flexibility in the admissibility regime to allow for special cases. We hope to define these exemptions as tightly as possible in the regulations to ensure that the tribunals are not forced as a matter of course to hold preliminary hearings on the issue. The ''just and equitable'' formulation in the amendment is too wide. 
 In developing an admissibility policy, the Government have been concerned to strike a balance between the key aims of ensuring that claims are not unreasonably deterred and making certain that there is communication in the workplace between employees and employers. 
 Far too often we see claims taken to tribunal where there has been no discussion between the individual and their manager. In 62 per cent. of claims surveyed in 1998, there was no meeting between the parties before the claim was lodged. In 37 per cent. of applications, there was no attempt to resolve the problem before the application was made. The Government intend to change that situation because litigation is an expensive and inflexible route to resolution; problems caught early are easier to resolve. 
 We will make concerted efforts to publicise the new admissibility criteria, but it is inevitable that some individuals will be unaware of them. There will be cases in which, through lack of awareness, people make inadmissible applications. We are keen to ensure that such individuals are not debarred from taking their grievances through the tribunal system. In most cases, we intend to give them a second chance to submit an application meeting the admissibility criteria. That will involve some extension of the normal time limits for making applications. 
 The regulations are important and the Government will consult widely on them. I hope that my explanation is sufficient and will mean that the hon. Gentleman will not press the amendment. I guess that amendment No. 63 was intended as a probing amendment. If so, I hope that the explanation that I have given will suffice. If not, I can assure the Committee that the Government fully intend to implement the clause and that the amendment is unnecessary. 
 Amendment No. 59 seems intended to ensure that the admissibility criteria apply to all jurisdictions listed in schedule 3. It will be apparent from my description of the policy in clause 33 that the Government intend admissibility to apply to grievances and not to claims arising out of the disciplinary process. The reason is quite simple: as discussed already, it would be unfair and unreasonable to make an individual's access to an employment tribunal contingent on a statutory procedure being followed when only the employer can initiate that procedure. Access should depend on an individual's own actions, not on someone else's. It would, therefore, be inappropriate to apply the clause to all jurisdictions in schedule 3. I call on the hon. Gentleman to withdraw his amendment.

Philip Hammond: I am grateful to the Minister for his clarification. I do not find anything unreasonable in the principle that he sets out. A provision under clause 31 gives someone a significant financial incentive to comply with the procedure before lodging a claim with the tribunal. As long as tribunals make use of their discretion to go above 10 per cent. and up to 50 per cent. in order to make it clear to applicants that they are expected to use the statutory procedures unless there are clear and good reasons why they should not, that side of things should work very well.
 We are discussing an exclusion of the ability to access a tribunal before going through the procedures. Someone might wish to do that for some reason, even though they recognise that they will be taking a financial risk with the size of their award in doing so-they may well be penalised for not having gone through the procedures first. I agree with the Minister that the test should be framed not to exclude claims that reasonably ought to be tested in the tribunal. I am happy with his explanation on that. 
 I am slightly puzzled by what the Minister said about amendment No. 59. The Minister will correct me if I misinterpret what he said, but I am reading from the TUC brief. I think that he said that in order for a claim to be admissible, the relevant party must first set out in writing the basis of the grievance and then a response would have to be forthcoming. Those would have to be the first two steps. The Minister went on to say that that should not apply to unfair dismissal because-I understand the logic of this-the power lies with the employer to dictate whether the process moves forward. 
 However, that power surely lies also with the employer in relation to all other jurisdictions if the requirement is for the first and second steps to have been carried out. As I said, and as I read in the TUC brief, those steps are that a grievance would have to have been put in writing and that a response would have to be forthcoming or a disciplinary procedure set in motion within a specified time scale. 
 It appears to me that that second step lies in the hands of the employer. I do not, therefore, understand the philosophical distinction between unfair dismissal and the other jurisdictions. If the Minister can explain that, I will be very grateful.

Brian Cotter: I thank the Minister for taking on board what has been suggested. I realise that it is difficult to take account of variable circumstances, especially where sexual allegations of some sort are concerned. I think, however, that it is very important that the suggestion is taken on board and seriously addressed in regulations. Otherwise, a great problem will arise. I welcome the Minister's comments, and will not press the amendment.

Alan Johnson: I appreciate the points that hon. Members have made.
 We do not intend step two of the grievance procedure to be part of the admissibility criteria. We intend step one to be included, which is entirely in the hands of employees. As I said in a previous debate, employers need to know what grievance their employees have before they come to an employment tribunal. By step one, the employee sets out the nature of the grievance. The whole list is set out in schedule 3, including the minimum wage, redundancy pay, discrimination and other things. 
 After the employee has put the case in writing, we propose to allow a period-we have not decided it definitely, but about four weeks is likely-for the employer to respond rather than sending the letter to the employer and then filling in the IT1. We do not envisage that to include step 2. I hope that that clarifies the point made by the hon. Member for Runnymede and Weybridge. The discipline procedure is entirely driven by the employer through statute, so it would be unfair to include discipline in the admissibility criteria. It is quite fair and practicable to include grievances if we follow the first step. 
 There has not been a debate on whether that is sensible, but most people seem to see the sense in it. The Institute of Directors said that it welcomed the emphasis that the Secretary of State for Trade and Industry placed on using internal procedures before applying for a tribunal. The CBI said that the most crucial element of the package is the proposal that employees must raise grievances with their employer before going to a tribunal. Employers are in no doubt that the clause relates to grievance. If I have clarified that sufficiently for the hon. Gentleman, I hope that he will withdraw his amendment.

Philip Hammond: As I said before, I do not have a problem with the principle at stake here, which I think is perfectly sensible. I was confused because the TUC brief suggested that the TUC is a little confused-employers may understand the matter perfectly well-in talking about a first and second step that will need to have happened. I thought that the Minister mentioned two steps as a prerequisite to accessing the tribunal in such circumstances, but the record will show whether that is correct.
 To be absolutely clear, I think that the Minister is now saying that the provision will apply in the case of a grievance procedure, and that the only requirement will be the first step, which is that written notice of the grievance has been given by the employee to the employer. Once that has been done, the employee will have satisfied the requirements for being allowed to apply to the tribunal, notwithstanding the fact that the remainder of the statutory procedure has not been carried out. It is a one-step hurdle, not a two-step hurdle. The Minister nods, so my point is clarified. 
 I have no problem with what is being sought here, and I beg to ask leave to withdraw the amendment. 
 Amendment, by leave, withdrawn.

Philip Hammond: I beg to move amendment No. 61, in page 37, line 27, leave out subsection (2).
 This looks like a subsection that definitely needs to be challenged. The Secretary of State will be given a regulation-making power to amend or repeal any enactment. I thought that it was a general principle in this place that we did not give the Secretary of State wholesale power to repeal chunks of primary legislation by regulation. 
 Following on from the comments of the hon. Member for Manchester, Central in the last debate, we might want to ponder on the possibility that some future Secretary of State might use this regulation-making power to repeal whole swathes of employment protection legislation on the strength of a 90-minute debate in Committee. I take it as a general principle that it is very poor practice to give the Secretary of State unfettered powers to repeal primary legislation by regulation. 
 If I have misunderstood the power being granted, no doubt the Minister will correct me. My understanding is that the clause will give the Secretary of State the power to repeal any piece of employment-related primary legislation by regulation on the strength of a 90-minute debate in a statutory instrument Standing Committee. I would have to urge my hon. Friends to resist such a power.

Tony Lloyd: I hope that my hon. Friend the Minister will be able to assure the Committee that the intent of subsection (2) is nothing like as wide as the hon. Member for Runnymede and Weybridge suggests.

Alan Johnson: Absolutely.

Tony Lloyd: My interpretation is that subsection (2) is limited by subsection (1), and, specifically, can only be used in pursuit of primary claims to employment tribunals and the like. It is a wide power even at that, which is why I asked my hon. Friend for clarification earlier on how exactly it would be used. I very much welcome the comment that he put on the record.
 I hope that he is able to reassure us further. I know that from his reaction to my comments already that my interpretation is the accurate one, and not that of the hon. Member for Runnymede and Weybridge. Nevertheless, it would be helpful if my hon. Friend could set out the Government's intentions. What do they have in mind and are there particular parts of existing legislation that they would seek to repeal?

Philip Hammond: I am grateful for the hon. Gentleman's clarification. From the Minister's reaction, the hon. Gentleman's interpretation was clearly right. Does the hon. Gentleman not think, however, that it would have been better if the Minister had used schedule 6, consequential amendments and repeals to spell out precisely what other pieces of legislation needed to be amended in order to give effect to clause 33(1)?

Tony Lloyd: I express affection for all manner of improvements in the way that we announce our legislation. Pre-legislative screening would have been very helpful. The Minister himself would probably agree with that, and that is the direction in which we ought to go. If we were not under the time pressure that our present procedure applies, it would also have been helpful to have had the regulations so that we could examine their full impact. The best that we can do is to ask the Minister to do his best to talk us through them at this stage so that the Committee has an idea of the Government's ambitions and the limitations on those ambitions.
 As a general point, Parliament has to be extremely careful in giving power to Secretaries of State to make law by regulation. We need be careful not because that power is extraordinary-it has been used by every Government over time-but because it is intended to give note powers that fundamentally alter the law, but powers that amend the law within the spirit of the Bill involved. Important issues are involved. 
 The whole Committee is sympathetic to the need to constrain future Secretaries of State. We know not when Ministers will come or go. I wish my hon. Friend the Minister many years in office, but I want to tie him to his own words. If he moves on to pastures greater and better, I hope that he will bequeath to his successors a framework that they can operate.

Alan Johnson: I am grateful to my hon. Friend the Member for Manchester, Central. I do not understand how anyone could move on to a greater job than being in Standing Committee F to discuss the Employment Bill.
 We do not intend to repeal large chunks of employment relations legislation. Use of the power must be related to the admissibility regime in subsection (1). Establishing that regime is a major step and the drafting of the regulations will require carefully attention. We shall consult widely on them before they are introduced. 
 The admissibility criteria will apply to many, although not all, the jurisdictions in schedule 3 and they will apply to many aspects of employment law. It is not a simple task to apply the admissibility regime to such a diverse set of legal rights and requirements and the criteria may fit more neatly into some parts of the legal framework than others. It is prudent to take the power to make any necessary amendments to ensure that the criteria can be clearly and consistently applied across all jurisdictions. That is why we need the power to amend the specific time limit provisions relating to each jurisdiction to be subject to the regime. 
 The amendment would remove that essential flexibility from the regulation-making process. I have said several times that the regulations will be subject to the affirmative resolution procedure. When initially set, they will be subject to the widest consultation and will relate only to clause 33(1) and not to any other part of the Bill. With those assurances, I hope that the hon. Member for Runnymede and Weybridge will withdraw his amendment.

Philip Hammond: The Minister has confirmed, as his hon. Friend the Member for Manchester, Central envisaged, that the powers under subsection (2) are more limited than I had thought, and I am glad about that. However, we are discussing a gradual slide down a parliamentary slope. Sooner or later, someone will have to sit down and work out what needs to go into schedules 6 and 7 to amend and repeal other legislation. In general, it is a bad principle to start including a general power to repeal or amend anything instead of working out what needs to be amended or repealed. The issue is not worth going into the trenches for and, because of the timetable, trench warfare is out of fashion in Standing Committees, much to my regret.
 The issue is worth noting. Schedules 6 and 7 purport to contain consequential amendments, repeals and revocations, but what is the point of them? Why not have a general power for the Secretary of State to amend, by regulation, anything that needs to be amended to make the implementation of the Bill easier and smoother. I do not like that trend in legislation, and I should have preferred the Minister to have taken the time to decide what he was going to do and then to work out what revocations, repeals and amendments he needed in order to give effect to this part of the Bill. 
 Having made that point, I shall not press the amendment because the Minister has confirmed that the power will be used narrowly, although that does not make the principle a good one. I beg to ask leave to withdraw the amendment. 
 Amendment, by leave, withdrawn.

Philip Hammond: I beg to move amendment No. 62, in page 37, line 30, after 'Service', insert
'and any other organisation representing persons appearing to the Secretary of State to be likely to be affected by the regulations'.
 The amendment repeats an argument that we had on another clause. I would like a requirement for the Secretary of State to consult not only ACAS, but users of employment tribunals. There are defined user groups in all regions of England and Wales and it would be relatively simple for the Secretary of State to consult those user groups. I see no reason why good consultative practice in pursuit of open government should not include consulting those user groups as well as ACAS. I am disappointed that last time we debated the matter the Minister was reluctant to include such a requirement in the Bill, but if he were able to assure the Committee that his intention is that in practice those user groups would be consulted, I would be satisfied at this stage.

Alan Johnson: This is a re-run of a similar amendment, No. 45. ACAS represents major figures from all sides of industry, leading academics and even employment lawyers. It has unrivalled knowledge and expertise to help us to frame these important regulations. We shall, of course, consult other organisations about the regulations in clause 33 before we introduce them. We shall consult widely on other changes to the regulations, but there is a practical problem with the word ''used''. It would require us to consult any organisation that represents people likely to be affected, so it would commit us to wider consultation on every single change in future. People ''likely to be affected'' is so wide-ranging that we would be bound to miss someone and any Government would almost certainly fail to meet a statutory consultative requirement drafted in such terms.

Philip Hammond: Can the Minister satisfy me with a specific undertaking that he would include in consultation the tribunal user groups in each tribunal region?

Alan Johnson: In terms of the initial application of the regulations, yes. We consulted widely on ''Routes to Resolution'', and we shall consult again on the regulations.

Philip Hammond: The Minister misinterpreted what I said. The requirement under clause 33(3) is that the Secretary of State must consult ACAS before exercising the powers in subsection (1). I am asking if he will also give an undertaking to consult with the tribunal user groups in each region before exercising those powers. I realise that the amendment is widely drafted and may not be appropriate, but I am seeking an assurance from him that the tribunal user groups will be consulted.

Alan Johnson: I am not trying to be difficult, but I do not like making legislation on the hoof. If I give that assurance, every future consultation, however narrow, small and pedantic, would have to be widened beyond ACAS. ACAS has considerable experience in dealing with employment tribunal users and the employment tribunal judiciary. I do not want to give assurances that would make life more difficult in future, so I am not willing to give the assurance that the hon. Gentleman seeks. I hope that the hon. Gentleman will withdraw his amendment, and I shall consider what he said to see whether there is a case for stating on Report, without introducing it in legislation, that the user groups should be consulted on every occasion.

Philip Hammond: The Minister is now going too far. I am ready to concede that the amendment is widely drafted and could cause difficulties. I hoped that he would find it easy to put on the record of the Standing Committee, but not to write into the Bill, that the Secretary of State will, in the narrow set of circumstances in which the powers would be exercised under subsection (1), consult with the clearly defined and limited number of tribunal user groups in each of the employment tribunal regions. The user groups will draw their own conclusions from the fact that the Minister has not been able to give that undertaking. They would expect to be consulted and are right to do so because the issue has been raised. So long as the Government propose to allocate sufficient time to the Report stage, I will ask the Minister to deal with such issues then, as well as with the headline issues to which we must return. I offer the Minister the opportunity to say whether that will happen.
 During the passage of the Bill, either on Report or in the other place, I hope that the Minister or a colleague of his will give that simple undertaking. That would entirely satisfy me on the point that lies behind this possibly unwisely drafted amendment. In recognising that it is too wide, I beg to ask leave to withdraw the amendment. 
 Amendment, by leave, withdrawn. 
 Clause 33 ordered to stand part of the Bill.

Clause 34 - Procedural fairness in unfair dismissal

Rob Marris: I beg to move amendment No. 78, in page 38, line 1, leave out from '(1),' to 'shows' in line 4 and insert
'failure by an employer to follow a procedure in relation to the dismissal of an employee shall not be regarded for the purposes of section 98(4)(a) as by itself making the employer's action unreasonable if he'.

Joe Benton: With this it will be convenient to take amendment No. 27, in page 38, line 5, after 'procedure', insert
'and the dismissal would have been fair apart from this section.'.

Rob Marris: The amendment seeks to clarify section 98A of the Employment Rights Act 1996. The meaning of new section 98A(2) and the context in which it sits have been the subject of much debate on Second Reading. Several individuals and organisations have expressed concern about the way in which the new regime would operate, particularly in relation to the overturning of Polkey. The amendment would clarify and probe those issues.
 Under new section 98A(1), unfair dismissal will take place if there is a breach of the basic procedure of schedule 2. That will lead to four weeks of compensation as set out in new section 112(5). The right to be accompanied under the schedule 2 basic procedure was clarified by the Minister when we debated it; he kindly confirmed that. The right to a fair hearing is implicit in schedule 2, and I hope that he will be able to make that explicit now. If there were no proper investigation under the basic schedule 2 procedure, I hope that he will also confirm that the employer who failed to carry one out would be caught by new section 98A(1)-a breach of the procedure-which would lead to an automatic finding of unfair dismissal. 
 I understand the Government's desire to encourage employers to adopt at least the basic procedure by introducing it statutorily, but we also need to encourage enhanced procedures-better than those in schedule 2-in the interest of better industrial relations and of having fewer cases come before employment tribunals because differences have already been resolved in the workplace. New section 98A(2) overturns the long-standing case of Polkey in 1998, which was raised on Second Reading. I am anxious that overturning Polkey will lead to employers not using the enhanced procedures and hiding behind the no-difference test. They might say that they would have got rid of the employee anyway and the fact that they did not follow the procedure does not matter because of what is stated in the legislation. I appreciate the Government's desire, encompassed in the Bill, to encourage enhanced procedures and the fact that, if we did not have the new subsection, an employer might be hoist by the petard of a minor breach of an enhanced procedure. If an employer were so hoist, he would be less likely to have an enhanced procedure for fear of going wrong, and would be more likely to fall back on the basic procedure under schedule 2. Nevertheless, proposed new subsection (2) raises questions, some of which I have tried to elucidate today. The Minister mentioned a forthcoming review of such issues. I seek his assurance that, in overturning Polkey, the review will establish whether proposed new subsection (2)-as drafted, or in the light of my amendment-dilutes enhanced procedures that improve on the basic schedule 2 procedure, thereby enabling employers to hide behind the wording, or whether the subsection results in employers moving away from enhanced procedures that operated before the Bill's enactment.

Brian Cotter: I wish to speak to amendment No. 27. As we know, under current law a tribunal can rule that an employee has been unfairly dismissed on either procedural or substantive grounds. Clause 34(1) changes the conditions relating to procedural fairness. If an employer fails to comply with the minimum statutory procedures, the tribunal will automatically find that the employee has been unfairly dismissed. However, clause 34 seems to go far beyond achieving that aim by excluding the possibility that a dismissal could be substantively unfair even where it is not procedurally unfair. For example, a person could be dismissed on a very minor ground such as turning up for work a minute late.
 Amendment No. 27 is designed to tighten up the clause by limiting its impact to the circumstances in which it appears it was intended to apply. Under the amendment, dismissals could be deemed unfair for other reasons, even if they were found to be procedurally fair. I should be interested to hear the Minister's response to that key point.

Mark Prisk: In principle, I welcome the attempt to minimise the impact of minor procedural changes. In that regard, the Government's effort to reverse the Polkey principle is acceptable, but the clause gives rise to problems, with which the amendments attempt to deal, and to an inconsistency that is at the heart of the clause's relationship with the rest of the Bill.
 On the one hand, the Government are using the Bill to promote the idea that businesses and all forms of employers should seek to follow a regular and accepted procedure, whether in general, disciplinary or dismissal situations. On the other hand, in many senses clause 34 reduces the importance of that same procedure. Perhaps the Minister would like to comment on that inconsistency and the message that it sends to employers and employees. I am also concerned that the absolute nature of proposals in relation to awards against a failure to follow minimum statutory procedures is potentially unfair to the smallest of firms. Neither the scope nor the character of the procedures is crystal clear, so the danger of an employer unintentionally falling foul of minor procedural mistakes is all the greater. 
 The Law Society's much-quoted briefing highlights the point that the hon. Member for Wolverhampton, South-West (Rob Marris) raised earlier, namely that although clause 34 may be intended to be narrow and focused, 
''its wording excludes the possibility that even where a dismissal is not procedurally unfair, it could still be substantively unfair. It does this by making the provision applicable . . . to the whole 'Part' of the Employment Rights Act 1996, in which it will be added.''
 There is a danger that the clause may have a wider effect than the Minister intends. Will he comment on that?

Tony Lloyd: The concentration on subsection (2) is important. The hon. Member for Hertford and Stortford mentioned the Polkey principle, so he should have no objection to its reversal. This could become an incredibly arcane debate in which only those of us who wear employment law anoraks are entitled to take part, but we risk unsettling some fundamental issues if the Bill stays in its current form.
 My hon. Friend the Member for Wolverhampton, South-West said that there are two primary concerns-first, that where an employer fails to meet the basic criterion of a fair hearing, natural justice is put at risk and, secondly, that an employer who fails to pursue a proper and fair investigation can use the current wording of the Bill to avoid the charge that their procedure was inadequate. 
 At first, I wondered whether common sense says that an employer who makes a tiny procedural slip up should not be charged with that error to the exclusion of everything else. An employer who has made a manifestly fair dismissal in the sense that the charge is of enormous gravity and under any logical terms would warrant dismissal may find that because he failed to put the right postscript on the letter it is deemed to be unfair. Naturally, we do not want that to happen. 
 Several kinds of cases that tribunals have in the past judged to be unfair dismissal would almost certainly not be so judged in future, because the reversal of the Polkey principle means that they are unable to make judgments on the same basis.

Mark Simmonds: Does the hon. Gentleman think that the reason why not many cases have fallen into this category is because small businesses are exempt, and that that is where problems will arise?

Tony Lloyd: We must look at several issues in the round. One problem is that we know only what tribunals have resolved. Because tribunals sit in geographically dispersed parts of the country there is no central collation of their proceedings. Examples are folklore unless they can be illustrated by real cases. To help the Committee, the TUC has tried to find practical examples where this change in the wording of the law will make a material difference.
 British Home Stores v. Burchell is an old case from 1978 in which the tribunal decided that an employer is under an obligation to carry out a reasonable investigation before initiating disciplinary action. Common sense would suggest that reasonable investigation is central to natural justice, a judgment which was confirmed by that tribunal, but that must be placed in context. Although an employer is under that duty, they do not have a duty to have got the case right. All they must demonstrate is that they believed that they were acting in the right way. They could have got it wrong, but only on the basis of proper investigation. 
 The problem with the schedule 2 minimal grievance and disciplinary structure is that it does not call on the employer to institute a proper investigation. Not only will the employer not have to get it right-it will be a reasonable defence to say that they thought that they got it right-it will not be necessary for them to say, ''I took proper steps to ensure that I got it right''. They can say, ''I believed that to be the case and I acted on it''. Under subsection (2), they will have to show that they would have decided to dismiss the employee if they had followed the procedure. 
 That is not a tough test; it is an extremely subjective test. How does the employer show that they would have acted that way had they followed the procedure and investigated? They could argue, ''I still would have dismissed the employee because he is a pain in the neck. We have wanted to get rid of him for years.'' The question of investigation is significant. 
 Last year's case of Midland Bank v. Madden provides another relevant example. Mr. Madden joined the bank as a school leaver and over a period of 11 years had risen through the ranks. He went from being a trainee bank clerk to chief cashier foreign clerk and eventually reached the position of leading clerk. He was a man of some probity within that organisation and up to that point he had an unblemished employment record. In July 1997, three debit cards were stolen from the bank almost certainly by a bank employee. Following a tip off from the bank's police liaison officer, the police raided Mr. Madden's home and he was arrested, but because of a lack of evidence he was released without charge. 
 Under our criminal justice system that is the end of the story. However, an internal workplace investigation took place, and although Mr. Madden denied any knowledge of the allegations the decision was made to sack him following an investigation of other employees. He exercised his right to appeal, but to no avail. The tribunal found that the tenor of the internal investigation pointed to Mr. Madden as the likely culprit. It also found that the investigation of other employees was not as thorough as the police investigation of Mr. Madden. It decided that the relevant managers had accepted the investigators' conclusions too readily and uncritically, and on that basis it decided that the investigation was inadequate and therefore found in his favour. 
 If that case were subject to this legislation, the employer would have argued that they would still have decided to dismiss the employee had they done anything differently because they had already drawn their conclusions. They would simply have asserted that they were right, and the tribunal would not have been in a position to decide that that dismissal was unfair. I ask my hon. Friend the Minister to consider that case carefully. 
 Bentley Engineering Co. Ltd. v. Mr. Mistry in 1978 is the final case that I should like to bring to the Committee's attention, and it concerns the question of how a meeting is conducted. Mr. Mistry was employed as an office clerk and became involved in a fight with another employee. Both men alleged that the other had started the fight, thus placing the blame on the other individual. Statements were taken from other employees who had witnessed the fight, and the assistant personnel officer, who interviewed both men the following day, decided to dismiss Mr. Mistry. He appealed, but neither the other combatant nor any witnesses were at the appeal hearing, so Mr. Mistry did not have the opportunity to cross-examine them. Both the employment tribunal and the appeals tribunal found that the dismissal was unfair because Mr. Mistry had not been given written statements by the witnesses and the other employee involved in the fight. The appeals tribunal ruled that the employer had failed to satisfy the requirements of natural justice, which entails: 
''not merely that a man shall have a chance to state his own case in detail; he must know sufficiently what is being said against him so that he can properly put forward his own case.''
 That was a fundamental tribunal decision. 
 Most people would agree with the tribunal that if Mr. Mistry did not have the opportunity to know the basis of the evidence against him or to cross-examine those who brought the case, his right properly to defend himself was abrogated. I contend that under this legislation a tribunal would be unable to consider that case in the same way. Schedule 2 does not contain an employee's right to know the case against them. More narrowly, it states: 
''Meetings must be conducted in a manner that enables both employer and employee to explain their cases.''
 Explanation of a case is not the same as an opportunity for Mr. Mistry to be confronted by the witnesses who put the case against him and to challenge their testimony. Once subsection (2) becomes law, a tribunal would find it difficult to reach the same judgment as the 1978 tribunal that Mr. Mistry had been unfairly dismissed. 
 I appeal to my hon. Friend to recognise that those are real cases. My argument is not hypothetical. It is not a knee-jerk, Luddite reaction, or an attempt to use minor slip ups by an employer as a way of conceding cases in which common sense suggests that an employee deserves dismissal. Sometimes there is a narrow gap between procedure and substantive cases, and they can almost amount to the same thing. In the cases that I have described, discovery of the substantive case depended on the procedure being proper and full.

Mark Prisk: I share the hon. Gentleman's concern that there are cases, some of which he has cited, where the line between what is substantive and what is procedural is unclear. However, would his criticisms not be better directed towards the weakness in the drafting of schedule 2 rather than being expressed through the amendment?

Tony Lloyd: Alas, Mr. Benton, we have passed that point in the Bill. I asked my hon. Friend the Minister whether we could strengthen schedule 2 by adopting, for example, the ACAS code, which would have raised the minimal level. That would have been one way of approaching the problem. My hon. Friend the Minister made it clear that although the Government support the ACAS code, he is trying to establish a minimum and simple threshold that all employers will take on board. Although I still urge my hon. Friend the Minister to look again at raising that threshold, I can understand his intention. With a simple code, as the schedule outlines, no one can really use the defence that it was too complicated and a terrible burden.
 Whether the Committee likes it or not, subject to Report and amendments in another place, schedule 2 is what we have. We must try to look at how to preserve the position for those who, at least notionally, are covered by something better than schedule 2 but will find that eroded by the impact of the Bill. 
 The hon. Gentleman raised an important point. I put another concern before the Committee. Because of custom and practice before tribunals, a range of tests applies to different types of disciplinary action. For example, on dismissals related to incapacity or sickness, an employer is required to give the employee fair warning and an opportunity to mend his or her ways and show that he or she is fit to do the job. On the other hand, in misconduct cases, the employer should investigate the complaints of misconduct fully and fairly and hear what the employee wishes to say in defence, explanation or mitigation. In redundancy cases, the employer should warn or consult any employees affected or their representatives, adopt a fair basis on which to let the redundancy occur and take such steps as may be fair or reasonable to avoid or minimise redundancy by redeployment in the organisation. 
 The important point is that different tests have arisen, because of different circumstances, by custom and practice over time. That is not unreasonable. Misconduct is clearly very different from redundancy. The test of reasonableness in redundancy is normally about ensuring that there is no arbitrary discrimination. Obviously, the test is different in a case of misconduct because misconduct is specific to an individual or group of individuals. 
 If we reverse the Polkey decision, the real concern is that those developed tests defined by the case law approach will be thrown out of the window and that, rather than having a refined system that offers fairness to all parties, we will have a much more arbitrary system. In the end, that could lead to injustice and unfairness because tribunals will no longer be able to make decisions in the way in which they have in the past. 
 I have a high regard for my hon. Friend the Member for Wolverhampton, South-West, but I am yet to be convinced that the amendment is the right way for us to move forward. I appeal to the Minister to reflect on the spirit of the concerns that have been raised and to recognise that there is substance in the remarks made by hon. Members on both sides. He should address those in a way that guarantees not a simple reversion to tribalism and the Luddite approach but that ensures that we will continue to get the benefit of the custom and practice that tribunals have shown, in such cases, in the interests of fairness in the workplace.

Alan Johnson: This is one of the most important debates on this part of the Bill. I will address the specific points that hon. Members have raised after I have placed on record the Government's thinking.
 Clause 34 has two main effects. First, it will reinforce the new minimum procedural standards by making it automatically unfair to dismiss employees unless those procedures have been followed, while providing for the first time that in such circumstances there will generally be some compensation for the employee. It will also ensure that when an employer fails to follow a procedure that goes beyond the new minimum procedures, or makes an error in following it, that in itself will no longer render the dismissal unfair, provided that he or she can show that following it would have made no difference to the decision to dismiss the employee and that the dismissal is otherwise fair.

Tony Lloyd: Those comments are interesting and helpful. My hon. Friend said that if the employer shows that he would have otherwise have followed the procedure, dismissal would be fair. The Bill as drafted does not have that test.

Alan Johnson: That is the nub of the issue. We are drafting new section 98A into subsection (2), and we believe that that makes the right connection in that it remains the employer's responsibility to prove that dismissal was fair. We have spoken about minimum standards, but the minimum will not be sufficient in all cases. The amendment tabled by my hon. Friend the Member for Wolverhampton South-West makes precisely that point about the linkage with the need for the dismissal to be fair in all other respects. I will come to that in a second.

Mark Prisk: Must an employer ensure that he does what is necessary, or should he do what is felt to be correct under the wider definition? How can employers ensure that they are doing what they should when such uncertainty exists?

Alan Johnson: We have spoken about that in our debates on schedule 2. Employers must not think that they need only go through the basic three-step procedure or go through the motions. For instance, if they dismiss someone for alleged theft, they have to go to the trouble of investigating whether there was theft. That is an important example, because it is not in the minimum standards, although it may be in the more elaborate and sophisticated procedure. If they tried to do that, they could not argue that the lack of an investigation made no difference to the decision to dismiss. Of course it would make a difference if there were no examination or investigation into the reasons for that dismissal.
 There is some debate about whether ''in writing'' should appear in the procedures, but employers must ensure that they understand-and they must understand it perfectly well-that that is the basic minimum procedure. They should not think that because the investigative part is not in the Bill-and is in the ACAS code-that there is therefore no need to investigate before dismissal. Employment tribunals are not that easy. Both my hon. Friends said that an employer could stand up and say, ''It made no difference to my decision, I would have dismissed that person anyway.'' Employers cannot get away with that in front of an employment tribunal. 
 That is the test in the Polkey case, where it was decided in 1998 to reverse the decision made in 1979 that there would be no difference, provided that there was no difference to the employer's decision to dismiss. The point rests on the employer's decision to dismiss. That is one problem that the employer has to get over, but the employer has to be fair in all other respects too. 
 It has been suggested that we have restored wholesale the no-difference test, which was overturned by Polkey, which is the leading case in this area. In fact, where the statutory minimum procedures are concerned, we are strengthening the principle in Polkey. I will give examples in a minute. We looked at cases that were lost by the employer and won by the applicant on the basis of the Polkey test. In the vast majority, the breach in procedure was a fundamental breach that is now covered by the basic three-step procedure. For example, there was no hearing, or employers did not tell the employee the case against them, or they did not have an appeal hearing. 
 The Bill should not been seen as reversing Polkey. It strengthens Polkey in respect of the basic minimum standards, and if those minimum standards are not kept, dismissal will automatically be unfair. The Polkey judgement made it likely that an employer who did not follow procedures would lose an unfair dismissal case. Our proposal makes it so important to follow minimum procedures that it will automatically be unfair to dismiss employees without doing so. That automatic unfairness will mean an automatic penalty of at least four weeks pay, unless the tribunal considers that that would result in injustice to the employer. It has some discretion. 
 At the moment, it is not uncommon for a dismissal to be found to be unfair solely on procedural grounds as a result of the Polkey judgment, but for the tribunal to award no compensation because the procedural failure caused no real injustice to the employee. In the great majority of such cases that we have looked at, the failure was in procedures that would have fallen within the new minimum standards and clause 34 will be in line with the Polkey judgment. Less frequently, the procedural breach relates to a procedure that would have gone beyond the new minimum procedures. It is only in such cases that we propose to allow employers to argue that following the procedure would have made no difference to the decision to dismiss. 
 The hon. Member for Hertford and Stortford (Mr. Prisk) said that that is inconsistent. We do not believe that. We are setting out the minimum procedures and making it automatically unfair to dismiss if the procedures have not been followed. We are encouraging people to look to the ACAS code, which still holds the field, and it would be perverse and a disincentive if we said to employers, ''This is the basic minimum. We want you to move to something more elaborate and sophisticated, but if you do, be careful because the slightest breach of those procedures will make it likely that you will always be found against at an employment tribunal.'' 
 There is consistency and logic in the provision. To have left Polkey in the new situation with basic minimum standards would have discouraged employers from having more elaborate procedures. As the hon. Gentleman said, it was our firm view that to introduce such a brave new world for every workplace, no matter how small, necessitated our introducing a minimum basic three-step procedure. 
 Only in cases in which employers have procedures over and above the minimum will restoration of the no-difference test apply. It is a partial and strictly defined restoration of the test. I emphasise that even when an employer is able to show that following a procedure beyond the statutory minimum would have made no difference to his decision to dismiss, the dismissal must otherwise be fair. It is not the case, as amendment No. 27 implies, that the employer is excused from acting fairly in other respects. On the contrary, he must have dismissed the employee for one of the potentially fair reasons set out in the Employment Rights Act 1996. We are not changing that clause. In all other respects, the employer must act reasonably when dismissing an employee, as section 98(4) of the 1996 Act requires. We are not changing that either. Clause 34 is not intended to make any changes to the basic principles of fairness and reasonableness. We believe that the current drafting protects that position.

Tony Lloyd: Will my hon. Friend concentrate on the case that I referred to him earlier-Bentley Engineering Co. Ltd. v. Mistry. The matter was investigated and statements were taken from witnesses, but the tribunal held that the dismissal was unfair because Mr. Mistry was not given adequate opportunity to know the witnesses' case against him or to cross-examine the witnesses. That is important. I accept what my hon. Friend said about the provision being not intended to catch such cases, but that may be its consequence. The employer would have the defence of saying that, having investigated the matter and carried out the procedures adequately, it drew the conclusion that Mr. Mistry had instigated the fight, so it would still have dismissed him even if Mr. Mistry had cross-examined the witnesses. The employer would be entitled to insist that that was the case and, under case law, would not have to prove that he was right in that, merely that he believed that to be the case. The employer believed that Mr. Mistry was the instigator of the fight and, having investigated the matter, dismissed him. However, the tribunal found that because Mr. Mistry did not have the opportunity properly to cross-examine, his rights under natural justice had been violated. The important point is that, although both parties have the right to put their case, nothing in schedule 2 procedures provides the right to cross-examine. That might seem like a narrow technical point, but it is fundamental to obtaining truth and, ultimately, justice. Perhaps Mr. Mistry would have been dismissed had proper cross-examination taken place, but because it did not, we will never know whether the case against him was well founded.

Alan Johnson: This is a crucial point. None of us can be absolutely sure how the examples to which my hon. Friend referred would have concluded in the new scenario, but the Government believe that dismissal would probably still have proven unfair. My hon. Friend mentioned the link with fairness, and gave examples of an investigation not being carried out and a meeting being conducted improperly. In keeping with the Polkey principle, an employer might say that such factors made no difference to his decision, but he would still have to prove that the decision was fair and reasonable in the light of the remaining protections for applicants.
 These points are of fundamental importance. If concerns remain that the clause is unclear, we are happy to consider spelling it out that partial restoration of the no-difference test will not excuse employers from acting reasonably in other respects. We are prepared to accept amendment No. 78, which similarly points out that, where a procedure has not been followed, a no-difference line of defence does not of itself guarantee that an employer acted reasonably. In other words, an employer must have acted reasonably in all other respects, and if he did not, a dismissal will still be unfair. According to parliamentary counsel, the amendment achieves the desired effect, and on that basis, we will accept it. 
 Amendment No. 27 would not have the required effect, although I understand the underlying concerns. It would introduce the concept that 
''the dismissal would have been fair apart from this section'',
 but the concept remains undefined. That would create uncertainty for tribunals, and risk their developing a test of fairness for proposed new section 98A that would be different from that otherwise applied in unfair dismissal cases. That is undesirable. 
 My hon. Friend the Member for Wolverhampton, South-West asked about the right to a fair hearing. Schedule 2 grants the right to a meeting-in other words, a hearing-but no more than that. However, unless dismissal without a fair hearing made no difference, it would be likely to be found unfair. My hon. Friend also asked about reviewing the clause to establish whether it had the desired effect. I can assure hon. Members that, over time, we will look closely at the practical effects of the change. During consultation, many employer groups told us that current law is a disincentive to putting in place more detailed procedures, and we shall want to establish whether the change has altered their practices. 
 My hon. Friend the Member for Manchester, Central rightly referred to employment law anoraks-indeed, some of us are well on the way to becoming cagoules. In any event, it is likely that all his examples would have constituted unfair dismissals, but I shall give the further example of the employer who dismisses a number of employees for racially harassing their colleagues. He loses the case solely because of a procedural error, even though the tribunal acknowledges that it made no difference to the outcome and awarded no compensation to the employees- 
 It being One o'clock, The Chairman adjourned the Committee without Question put, pursuant to the Standing Order. 
 Adjourned till this day at half-past Four o'clock.